China Eyes up to 85% Stake in Myanmar's Strategic Kyauk Pyu Port

Chinese President Xi Jinping, right, shakes hands with Myanmar's President Htin Kyaw after a signing ceremony at the Great Hall of People on April 10, 2017 in Beijing, China.(Photo : Getty Images)

China is planning to acquire at least 85 percent of Myanmar's strategic sea port Kyauk Pyu, located on the Bay of Bengal, as part of its ambitious "One Belt, One Road" initiative, according to negotiating documents reviewed by Reuters and three other people with knowledge about the talks.

A consortium spearheaded by China's CITIC group reportedly plans to take between 70 and 85 percent stake on Myanmar's $7.3 billion deep sea port. The size is substantially bigger than the 50-50 joint venture proposed by Myanmar in 2015, a proposal rejected by CITIC, the two people included in the talks said.

Kyauk Pyu is significant for China as it is the point of entry for Chinese oil and gas pipeline and serves an alternative route for its energy imports from Middle East to bypass the congested Malacca Straits. It is part of two projects, which includes an industrial park, for a special economic zone in Myanmar's Rakhine State, Daily Mail reported.

Meanwhile, negotiations between Myanmar's government and CITIC are set to start next week. And the country has signed an agreement last month that will see oil pumped through the pipeline from Kyauk Pyu to China.

One of the sources said that CITIC was in the "driving seat" on the port project, and it is unlikely for Myanmar to ask for over 30 percent stake.

"Some people worry that China would have the power... if it owns 85 percent... but Myanmar doesn't have other options," the source said, noting Myanmar government's financial constraints.

Myanmar and the CITIC-led consortium will divide the funding in proportion to the stake agreed, sources revealed.